{"data":{"id":"us-ky/krs-61.598","jurisdiction":"us-ky","citation":"KRS 61.598","heading":"Limitations and exclusions on increases in creditable compensation in last","body":"five years of service for employees retiring on or after January 1, 2018 --\nExceptions -- Employer to pay actuarial costs resulting from certain increases\nin creditable compensation -- Inquiries from employers -- Hearing and appeal\n-- Reporting of exemptions -- Inapplicability to hybrid cash balance and money\npurchase plan participants.\n(1) As used in this section, \"bona fide promotion or career advancement\":\n(a) Means:\n1. A professional advancement in substantially the same line of work held\nby the employee in the four (4) years immediately prior to the final five\n(5) fiscal years preceding retirement or a change in employment position\nbased on the training, skills, education, or expertise of the employee that\nimposes a significant change in job duties and responsibilities to clearly\njustify the increased compensation to the member; or\n2. a. An increase in creditable compensation for all employees in a\nspecified c lass due to an increase in rate of pay authorized or\nfunded by the legislative or administrative body of the employer or\ndue to an increase in rate of pay mandated in a collective\nbargaining agreement approved by the legislative body of the\nemployer.\nb. Subdivision a. of this subparagraph shall be retroactive to apply to\nany member whose effective retirement date occurred on or after\nJuly 1, 2021; and\n(b) Does not include any circumstance where an elected official participating in\nthe Kentucky Employees Ret irement System or the County Employees\nRetirement System takes a position of employment with a different employer\nparticipating in any of the state-administered retirement systems.\n(2) (a) For employees retiring from the Kentucky Employees Retirement System, the\nCounty Employees Retirement System, or the State Police Retirement System\non or after January 1, 2018, the systems shall, for each of the retiring\nemployee's last five (5) fiscal years of employment, identify any fiscal year in\nwhich the creditable compensation increased at a rate of ten percent (10%) or\nmore annually over the immediately preceding fiscal year's creditable\ncompensation. The employee's creditable compensation in the fi scal year\nimmediately prior to the employee's last five (5) fiscal years of employment\nshall be utilized to compare the initial fiscal year in the five (5) fiscal year\nperiod.\n(b) Except as limited or excluded by subsections (3) and (4) of this section, an y\namount of increase in creditable compensation for a fiscal year identified\nunder paragraph (a) of this subsection that exceeds ten percent (10%) more\nthan the employee's creditable compensation from the immediately preceding\nfiscal year shall not be incl uded in the creditable compensation used to\ncalculate the retiring employee's monthly retirement allowance. If the\ncreditable compensation for a specific fiscal year identified under paragraph\n(a) of this subsection as exceeding the ten percent (10%) incre ase limitation is\nnot used to calculate the retiring employee's monthly retirement allowance,\nthen no reduction in creditable compensation shall occur for that fiscal year.\n(c) If the creditable compensation of the retiring employee is reduced as provided\nby paragraph (b) of this subsection, the retirement systems:\n1. Shall refund the employee contributions and interest attributable to the\nreduction in creditable compensation; and\n2. Shall not refund the employer contributions paid but shall utilize those\nfunds to pay down the unfunded liability of the pension fund in which\nthe retiring employee participated.\n(3) (a) In order to ensure the prospective application of the limitations on increases in\ncreditable compensation contained in subsection (2) of this s ection, only the\ncreditable compensation earned by the retiring employee on or after July 1,\n2017, shall be subject to reduction under subsection (2) of this section.\nCreditable compensation earned by the retiring employee prior to July 1,\n2017, shall not be subject to reduction under subsection (2) of this section.\n(b) If the reductions in creditable compensation during a retiring member's entire\nlast five (5) years of employment results in a reduction in his or her monthly\nretirement allowance of less tha n twenty -five dollars ($25) per month or an\nactuarially equivalent value under the various payment options, then no\nreduction in creditable compensation or retirement allowances shall occur\nunder subsection (2) of this section.\n(4) Subsection (2) of this section shall not apply to:\n(a) A bona fide promotion or career advancement as defined by subsection (1) of\nthis section;\n(b) A lump -sum payment for compensatory time paid to an employee upon\ntermination of employment;\n(c) A lump-sum payment made pursuant to an alternate sick leave program under\nKRS 78.616(5) that is paid to an employee upon termination of employment;\n(d) Increases in creditable compensation in a fiscal year over the immediately\npreceding fiscal year, where in the immediately preceding fisca l year the\nemployer reported the employee as being on leave without pay for any reason,\nincluding but not limited to sick leave without pay, maternity leave, leave\nauthorized under the Family Medical Leave Act, and any period of time\nwhere the employee rec eived workers' compensation benefit payments that\nwere not reported to the plan as creditable compensation;\n(e) Increases in creditable compensation directly attributable to an employee's\nreceipt of compensation for:\n1. Overtime hours worked while serving as a participating employee under\nany state or federal grant, grant pass -through, or similar program that\nrequires overtime as a condition or necessity of the employer's receipt of\nthe grant; or\n2. The first one hundred (100) hours of mandatory overtime ho urs that the\nemployee is individually required to work by the employer during a\nfiscal year. This subparagraph shall not be construed to apply to\novertime hours voluntarily worked by the employee or in situations in\nwhich the employee has the option to ele ct out of participation in\novertime hours. Any mandatory overtime hours exempt under this\nsubparagraph shall be in addition to any overtime hours otherwise\nexempt under the provisions of this subsection; and\n(f) Increases in creditable compensation directl y attributable to an employee's\nreceipt of compensation for overtime performed during and as a result of a\nstate of emergency declared by:\n1. The President of the United States or the Governor of the\nCommonwealth of Kentucky; or\n2. A local government in wh ich the Governor authorizes mobilization of\nthe Kentucky National Guard pursuant to KRS 38.030 and 39A.950\nduring such time as the National Guard is mobilized.\n(5) (a) For employees retiring on or after January 1, 2014, but prior to July 1, 2017,\nthe last participating employer shall be required to pay for any additional\nactuarial costs resulting from annual increases in an employee's creditable\ncompensation greater than ten percent (10%) over the employee's last five (5)\nfiscal years of employment that are  not the direct result of a bona fide\npromotion or career advancement. The cost shall be determined by the\nretirement systems.\n(b) Lump-sum payments for compensatory time paid to an employee upon\ntermination of employment shall be exempt from this subsection.\n(c) The Authority shall be required to answer inquiries from participating\nemployers regarding this subsection. Upon request of the employer prior to\nthe employee's change of position or hiring, the systems shall make a\ndetermination that is binding to  the systems as to whether or not a change of\nposition or hiring constitutes a bona fide promotion or career advancement.\n(d) For any additional actuarial costs charged to the employer under this\nsubsection, the systems shall allow the employer to pay the costs without\ninterest over a period of one (1) year from the date of receipt of the employer's\nfinal invoice.\n(6) The Authority shall determine whether increases in creditable compensation during\nthe last five (5) fiscal years of employment prior to retirement constitute a bona fide\npromotion or career advancement and may promulgate administrative regulations in\naccordance with KRS Chapter 13A to administer this section. All state -\nadministered retirement systems shall cooperate to implement this section.\n(7) Any employer who disagrees with a determination made by the system in\naccordance with this section regarding whether an increase in compensation\nconstitutes a bona fide promotion or career advancement for purposes of subsection\n(5) of this section may request a hearing and appeal the decision in accordance with\nKRS 61.645(16) or 78.782(16).\n(8) For the fiscal year beginning July 1, 2017, and subsequent years, the Kentucky\nRetirement Systems and the County Employees Retirement System shall provide a\nmeans for employers to separately report the specific exceptions provided in\nsubsection (4) of this section within the reporting system utilized by the employers\nfor making employer reports under KRS 16.645, 61.675, and 78.545. The Kentucky\nRetirement Systems a nd the County Employees Retirement System shall\ncontinually provide communication, instructions, training, and educational\nopportunities for employers regarding how to appropriately report exemptions\nestablished by subsection (4) of this section.\n(9) This section shall not apply to employees participating in the hybrid cash balance\nplan as provided by KRS 16.583, 61.597, 78.5512, and 78.5516.","path":["KRS Chapter 61"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=58141","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:15Z","sha256":"56f6543c3e993d94849ddc531b320ac809e83803d4edb0cae258c83d9e7f1de6","source_id":"us-ky","stale":false,"prev":"us-ky/krs-61.597","next":"us-ky/krs-61.599"},"notice":"GroundRules: Original legal text. Not legal advice."}